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Transcript

The Honest Mortgage Affordability Talk · The Ground Game

• 0:03
  SPEAKER_01: Welcome to the ground game for mortgage professionals built for the fight.
• 0:10
  SPEAKER_01: Hosted by Brian Lovell and Mark Milo.
• 0:17
  SPEAKER_01: All right, so hey, let's kick it off.
• 0:18
  SPEAKER_01: Uh a new podcast coming out for loan originators, operators, business owners in the business.
• 0:24
  SPEAKER_01: I think, Mark, one of the things you and I agree on a lot is how do we run this business like a business, from the individual loan officer to the branch manager to the executive to owners of a company?
• 0:36
  SPEAKER_01: And uh we just kind of came together and had an idea, hey, maybe we should start something on our own for the industry, an industry that's given both of us so much.
• 0:43
  SPEAKER_01: What can we do to kind of give it back, man?
• 0:45
  SPEAKER_01: Would you want to give us a little insight on why we're sitting here and why we decided to start this thing?
• 0:50
  SPEAKER_00: For sure.
• 0:50
  SPEAKER_00: I, you know, I when I I'm an advid, avid podcast listener.
• 0:53
  SPEAKER_00: So I'm I'm out there, you know, trying to take in as much information as I can, assimilate as much as I can because of a communication, not just to the team, but also with my referral partners and with my clients.
• 1:04
  SPEAKER_00: I always want to come off like everybody's got their stick.
• 1:06
  SPEAKER_00: Is it, you know, are you are you the guy who likes to pick up dinner and lunch?
• 1:10
  SPEAKER_00: Are you the one who hosts caravans or helps people sponsor caravans?
• 1:14
  SPEAKER_00: My thing is I want to be the guy that people refer to and today, he understands the marketplace, right?
• 1:20
  SPEAKER_00: Not just what's happening with interest rates, but also what's happening in, you know, with existing home sales or new home sales, what's driving the market this week or this month or this year.
• 1:30
  SPEAKER_00: And so the thing that I realized in talking with you is that I don't think there's a podcast quite like this that exists already in the marketplace.
• 1:38
  SPEAKER_00: We have plenty of great podcasts out there.
• 1:40
  SPEAKER_00: I'll throw out Logan Motoshami's podcast with Housing Wire.
• 1:43
  SPEAKER_00: It's a great house, that's a great podcast for understanding the market, yeah, what's going on.
• 1:48
  SPEAKER_00: But tangible, practical, loan originator type stuff, you're not going to find it there because that's not necessarily what Logan does, and nor does he purport to.
• 1:56
  SPEAKER_00: So there's that part of it.
• 1:58
  SPEAKER_00: And then there's a part of it of just running a company.
• 2:01
  SPEAKER_00: You know, I'm in I'm in leadership at the company here, you're in leadership at the company, I'm an owner at the company, uh, understanding what it's like to have to start a company in the middle of the pandemic and then have those C winds change fast.
• 2:12
  SPEAKER_00: Yes.
• 2:12
  SPEAKER_00: And all of a sudden you go from a bunch of tailwinds to a bunch of headwinds that have lasted way longer than anybody thought they would.
• 2:19
  SPEAKER_00: And so here we find ourselves in you know, summer of 2026 trying to solve a pretty complex problem uh for the benefit of our clients, for the benefit of our referral partners, and for the benefit of ourselves.
• 2:32
  SPEAKER_01: Yeah.
• 2:32
  SPEAKER_01: Yeah.
• 2:32
  SPEAKER_01: So I think one of the most unique things that we probably bring to the table is we just have killer haircuts.
• 2:38
  SPEAKER_01: Yeah.
• 2:38
  SPEAKER_01: You know, couple, a couple bald dudes just talking about mortgages.
• 2:41
  SPEAKER_00: Just reels in the ladies.
• 2:42
  SPEAKER_00: Yeah.
• 2:43
  SPEAKER_01: Yeah, reels and the ladies.
• 2:45
  SPEAKER_01: Yes.
• 2:45
  SPEAKER_01: Yeah.
• 2:45
  SPEAKER_01: So, you know, one of the things we were talking about as we were just kind of, you know, setting up here was man, what what's the current thing we're trying to solve for in the in the industry, right?
• 2:53
  SPEAKER_01: And you you had kind of mentioned like, man, it's it's been a tough couple of years.
• 2:57
  SPEAKER_01: Like, you know, I we even joked around, like, we don't even meet if I don't get kicked in the teeth early in 2022.
• 3:03
  SPEAKER_01: Right, right.
• 3:03
  SPEAKER_01: And for a loaner on the street like you are, doing$130 plus million dollars in business, you've been taking licks for a long time as well.
• 3:10
  SPEAKER_01: Yeah.
• 3:10
  SPEAKER_01: So kind of with that in mind, like, man, what what are some of the practical things we need to be taking a look at?
• 3:16
  SPEAKER_01: Do we need to be concerned about the future of housing?
• 3:18
  SPEAKER_01: What are some of the things that we need to solve for that we can get into over the next couple of episodes on this?
• 3:23
  SPEAKER_00: Let me frame this in the context of what I genuinely believe, and this stretches out way beyond mortgage and way beyond housing.
• 3:31
  SPEAKER_00: Anything that needs to evolve or change or improve, the seeds for that are sown in conversations.
• 3:39
  SPEAKER_00: That's where they begin.
• 3:41
  SPEAKER_00: Dialogue, right?
• 3:42
  SPEAKER_00: Until you're willing to have honest dialogue, and honest sometimes is uncomfortable.
• 3:46
  SPEAKER_00: Honest sometimes is not necessarily what everybody wants to hear.
• 3:50
  SPEAKER_00: Until you're willing to have that, you're not going to get on the path to solving a problem.
• 3:55
  SPEAKER_00: And we talk about the largest asset class in the entire world, it's the United States housing market.
• 4:01
  SPEAKER_00: It's bigger than the stock market, it's bigger than the bond market, it's the largest asset class that exists.
• 4:06
  SPEAKER_00: And so what I what I would say to you, and I'll ask you this question, is and I think this is a question that every person in housing, whether you're a real estate agent, insurance, mortgage originator, business owner, everybody needs to ask this question of themselves and be candid about the answer.
• 4:22
  SPEAKER_00: And the question is, is now a good time to buy a home?
• 4:26
  SPEAKER_00: Yeah, well, okay.
• 4:27
  SPEAKER_01: So I that's a that's an interesting question because I think if you put a room full of loan originators or folks in this business together, we're all going to try to solve for how do we say that to our referral partners, to potential buyers that makes everybody believe right now is a perfect time to buy a home.
• 4:46
  SPEAKER_01: Now the reason the reality is we've been having this conversation for a decade.
• 4:50
  SPEAKER_00: Yep.
• 4:51
  SPEAKER_00: I I would say, is it a good time to embrace home ownership?
• 4:56
  SPEAKER_00: Almost always it is based upon whatever stage of life that you're in.
• 5:01
  SPEAKER_00: But it's degrees.
• 5:02
  SPEAKER_00: There's there's not a black and white or an on-off switch here.
• 5:05
  SPEAKER_00: It's degrees.
• 5:06
  SPEAKER_00: And I would say the degrees of is it worth it versus is it not?
• 5:11
  SPEAKER_00: Is it worth it to buy versus is it worth it to rent?
• 5:14
  SPEAKER_00: It's way too close for my liking.
• 5:16
  SPEAKER_00: And what frustrates me about that is that I think so much of it is solvable and not necessarily from the level of the Federal Reserve and not necessarily from some, you know, that the president's desk.
• 5:27
  SPEAKER_00: Sure.
• 5:27
  SPEAKER_00: I think it's solvable from other places.
• 5:29
  SPEAKER_00: And I do think, though, there are still success stories too.
• 5:32
  SPEAKER_00: And I think, you know, we're writing one.
• 5:34
  SPEAKER_00: We're in the middle of writing a success story, but it doesn't come without extraordinarily, extraordinary levels of effort.
• 5:40
  SPEAKER_01: Yeah.
• 5:41
  SPEAKER_01: So I want to, I want to nail you down to something that you just said because you were basically like you said, I don't want to give up the capital or the assets to even start this road to homeownership.
• 5:51
  SPEAKER_00: Yep.
• 5:52
  SPEAKER_01: Man, can I can you give us a little more on that?
• 5:54
  SPEAKER_01: Sure.
• 5:54
  SPEAKER_00: So when you start thinking about, all right, you've got this nest egg, right?
• 5:58
  SPEAKER_00: And you're thinking I I gotta park this somewhere and I've got to have it do something for me.
• 6:04
  SPEAKER_00: Well, you're looking at a stock market that's setting records, right?
• 6:07
  SPEAKER_00: You're looking at a stock market that is, you know, especially if you're invested in certain set segments.
• 6:12
  SPEAKER_01: You're gonna say then that you think there's better places to put your money than housing.
• 6:16
  SPEAKER_00: I'm saying the argument could be made that are there better places to put that nest egg and just rent when values are likely to remain stagnant.
• 6:24
  SPEAKER_00: And this is my frustration with where housing is.
• 6:27
  SPEAKER_00: And I think until we as housing professionals, the practitioners of housing, right, the people who are out there practicing this craft, until we get honest about that, until we are honest about the problems that we face, we stand zero chance of solving them.
• 6:41
  SPEAKER_00: And so when we placate each other and when we tell tell our clients, of course, it's always a good time to buy a home, we're not doing, we're not solving a problem.
• 6:48
  SPEAKER_00: That and it's a problem with duration.
• 6:50
  SPEAKER_00: We have had this durable problem now since spring of 2022.
• 6:55
  SPEAKER_00: It has persisted.
• 6:56
  SPEAKER_00: And I don't hear anybody talking solutions.
• 6:59
  SPEAKER_01: Okay.
• 7:00
  SPEAKER_01: So I want to get to the solutions because I know you have a couple of ideas here.
• 7:03
  SPEAKER_01: And again, these are things that like these are conversation starters.
• 7:07
  SPEAKER_01: So the argument that I'll make to that is like I'll just give my specific example.
• 7:11
  SPEAKER_01: So I've lived in my home for about 21 years.
• 7:14
  SPEAKER_01: By the way, never intended to live in it that long, but I bought it in 2004.
• 7:18
  SPEAKER_01: You know what happened in 2007, 2008.
• 7:21
  SPEAKER_01: Right.
• 7:22
  SPEAKER_01: Okay.
• 7:22
  SPEAKER_01: So I bought it at I probably paid the most for the home in my neighborhood than anybody did.
• 7:27
  SPEAKER_01: Then it was worth nothing, right?
• 7:30
  SPEAKER_01: And then it started to come back.
• 7:31
  SPEAKER_01: But here's the reality: my payment has been fixed over that period of time.
• 7:34
  SPEAKER_01: So, like in today's dollars, my mortgage payment, I'll just be transparent, it's$2,200 a month.
• 7:39
  SPEAKER_01: I live in a four-bedroom, three-bath home on a corner lot with a pool and a hot tub.
• 7:43
  SPEAKER_00: Yeah.
• 7:44
  SPEAKER_01: You can't rent for that, Mark.
• 7:45
  SPEAKER_01: No.
• 7:46
  SPEAKER_00: You can't.
• 7:47
  SPEAKER_00: But you also can't get in the time machine and go back there and do it again.
• 7:50
  SPEAKER_00: No, no, no.
• 7:51
  SPEAKER_01: But like that's one of the arguments that I make for housing being the best place for us to grow wealth.
• 7:58
  SPEAKER_01: I understand your argument in this case is hey, there might be some better places to put your money.
• 8:03
  SPEAKER_00: Yeah.
• 8:03
  SPEAKER_00: How and I think this is, I think we're both driving at the same thing, but I'm coming at it from a different angle.
• 8:08
  SPEAKER_00: The problem is the the price of the asset, right?
• 8:10
  SPEAKER_00: The price of the asset is really high compared to what's happened with wages.
• 8:15
  SPEAKER_00: And by the way, when we had a Federal Reserve and an administration on both sides of the aisle that allowed inflation to run hotter than 2% for four plus years, it's eroded the value of what you earn.
• 8:26
  SPEAKER_00: And in some, in some years, you might have been getting raises, but those raises didn't even keep pace with inflation.
• 8:32
  SPEAKER_00: So you were actually going backwards.
• 8:33
  SPEAKER_00: You're actually going backwards.
• 8:34
  SPEAKER_00: This is my frustration.
• 8:35
  SPEAKER_00: And so I think the benefit that we've realized, right?
• 8:37
  SPEAKER_00: We're both, I'm in my 50s.
• 8:38
  SPEAKER_00: Are you in your 50s?
• 8:39
  SPEAKER_01: I turned 50 in July.
• 8:40
  SPEAKER_00: There we go.
• 8:41
  SPEAKER_00: So the benefit that we experienced, right?
• 8:44
  SPEAKER_00: And and and that we got to enjoy and the beauty that we realized in our lives of this wealth creation tool that we also got to live in, right?
• 8:53
  SPEAKER_01: Yes.
• 8:53
  SPEAKER_00: You don't live in a stock.
• 8:55
  SPEAKER_00: Like we got to we got to buy this thing and live in it and watch it appreciate and become one of our greatest sources of wealth and security.
• 9:03
  SPEAKER_00: This next generation doesn't get that.
• 9:05
  SPEAKER_00: And that's what I am passionate about talking about, about solving, right?
• 9:10
  SPEAKER_00: We have to solve for this.
• 9:12
  SPEAKER_00: And and in the meantime, while this is persisting, and until we do have it solved, we have to find a way to make a living in this industry.
• 9:20
  SPEAKER_00: So these are these are not simple things.
• 9:22
  SPEAKER_01: I get paid to close loans.
• 9:24
  SPEAKER_01: Right.
• 9:24
  SPEAKER_01: Me too.
• 9:25
  SPEAKER_01: Me too.
• 9:26
  SPEAKER_01: Well, let's make an argument for why we should close more of them.
• 9:28
  SPEAKER_01: Let's do it.
• 9:29
  SPEAKER_01: Let's do it.
• 9:30
  SPEAKER_01: So, Mark, what's the first thing you want to I I know you've got three solutions.
• 9:33
  SPEAKER_01: We probably don't get into them all on this episode, right?
• 9:35
  SPEAKER_01: But let's let's throw out the first one and we'll throw out maybe a teaser for the next couple, and we'll we'll we'll give people a reason to come back.
• 9:41
  SPEAKER_00: I'm gonna give you the most unpopular one.
• 9:43
  SPEAKER_01: Oh, I love it.
• 9:44
  SPEAKER_01: Here comes the most unpopular one.
• 9:46
  SPEAKER_01: Let's get crazy about it.
• 9:46
  SPEAKER_00: That when everyone hears this, they're gonna be like, screw that guy.
• 9:49
  SPEAKER_00: I'm going to the next podcast.
• 9:51
  SPEAKER_00: The most unpopular one is there should be a voluntary prepayment penalty that uh a client, a buyer could opt in for in exchange for a lower interest rate.
• 10:03
  SPEAKER_00: Okay.
• 10:03
  SPEAKER_00: This is already in play in our marketplace.
• 10:06
  SPEAKER_00: Non-QM.
• 10:07
  SPEAKER_00: Yeah.
• 10:07
  SPEAKER_00: Non-QM is at least 10 to 15% of the market, depending upon what market you're in.
• 10:11
  SPEAKER_00: DSCRs are probably the biggest segment of the non-QM market.
• 10:15
  SPEAKER_00: And you can opt in for a one, two, three, four, five-year prepayment penalty in exchange for a lower rate.
• 10:20
  SPEAKER_00: And we ran pricing in our pricing engine across multiple DSCR products.
• 10:26
  SPEAKER_00: And if you're opting in for a three or four-year prepayment penalty, then you're seeing half a point improvement in rate.
• 10:33
  SPEAKER_00: Yeah.
• 10:33
  SPEAKER_00: Three quarters in some cases, improvement in rate.
• 10:36
  SPEAKER_00: Yeah.
• 10:36
  SPEAKER_01: That's and in some cases, a pricing better than agency.
• 10:39
  SPEAKER_00: That's a game changer.
• 10:40
  SPEAKER_01: Yes.
• 10:41
  SPEAKER_00: And yeah, I know there's some stuff in the regs that prevent you know prepayment penalties on agency loans.
• 10:46
  SPEAKER_00: And certainly Fannie Mae's guidance and legal documents would have to get amended.
• 10:51
  SPEAKER_00: But if you could give borrowers the choice, because what's happening right now is investors are looking out at the spectrum of buyers and they're saying that it's so common now for someone to buy a home, sell their former home, plunk all that money down and pay off their mortgage or pay it down substantially.
• 11:08
  SPEAKER_00: And that's not why I'm in this game.
• 11:10
  SPEAKER_00: I'm in this game to make money on the long on the long term.
• 11:13
  SPEAKER_00: If I'm an investor, and when when we don't know who's going to do that, right, we don't, then everyone has to get punished.
• 11:19
  SPEAKER_00: We socialize the losses.
• 11:21
  SPEAKER_00: We we take a look at the full spectrum of buyers and we go, we don't know which one of you guys is going to do this to us or what handful are going to do it to us, so you're all going to pay a fee.
• 11:30
  SPEAKER_00: And the sad, ugly truth that we don't tell our clients is that if you bought a home between late 2022 and now, and what what you paid, the premium that you paid on an agency loan went so someone else could pay off their mortgage early without a penalty.
• 11:47
  SPEAKER_00: You paid a higher rate or a higher cost so someone else out there could pay their loan off in the first 12 months.
• 11:53
  SPEAKER_00: And that's a reality.
• 11:54
  SPEAKER_00: And until we're honest with people about that, we're never going to get them to voluntarily agree that prepayment penalties are a good idea.
• 12:01
  SPEAKER_01: No man, I listen, I think you're absolutely right.
• 12:03
  SPEAKER_01: I I think they're the prepayment penalty, it came out as part of Dodd Frank, I believe.
• 12:07
  SPEAKER_01: Yeah.
• 12:08
  SPEAKER_01: It listen, there were good intentions there, but to your point, I think this is the argument you're making.
• 12:12
  SPEAKER_01: That was almost 20 years ago, as 15, 18 years ago.
• 12:17
  SPEAKER_01: And the market has changed and the market has shifted.
• 12:19
  SPEAKER_00: Yeah.
• 12:20
  SPEAKER_01: And we need to put American consumers and homeowners in a position to help them win in the market that we're in, not the market that we came out of.
• 12:28
  SPEAKER_00: So I used to fly airplanes for a living.
• 12:30
  SPEAKER_00: And in an airplane, when you study airplane accidents, is one thing that we do all the time.
• 12:34
  SPEAKER_00: It's never one thing.
• 12:36
  SPEAKER_00: It's never the, oh, this one thing happened and that's why the airplane crashed.
• 12:39
  SPEAKER_00: It's always a series of events.
• 12:40
  SPEAKER_00: And if you could interrupt any of those series of events, you could have had a different outcome.
• 12:44
  SPEAKER_00: It's no different than where we are now.
• 12:46
  SPEAKER_00: We had crazy run-up in appreciation, people with really low interest rates, now they're sitting on a ton of equity, right?
• 12:53
  SPEAKER_01: Yeah.
• 12:53
  SPEAKER_00: Their life is dynamic, their mortgage is not.
• 12:55
  SPEAKER_00: So their life has evolved.
• 12:57
  SPEAKER_00: They're either getting divorced, they're getting married, they're having kids, they're getting a new job.
• 13:00
  SPEAKER_00: It's time to buy the new home.
• 13:01
  SPEAKER_01: Yeah.
• 13:02
  SPEAKER_00: But the last thing they want to do is be stuck with a high interest rate and a high mortgage.
• 13:05
  SPEAKER_00: So what do they do?
• 13:06
  SPEAKER_00: They buy, then sell because there's not enough inventory for them to make a contingent offer.
• 13:11
  SPEAKER_00: They have to make a non-contingent offer.
• 13:13
  SPEAKER_00: Then they sell and they take this tax-free money that just came to them, and they're like, here's what I'm going to do.
• 13:18
  SPEAKER_00: I'm going to plunk it down on that new home.
• 13:20
  SPEAKER_00: I'm going to knock my payment down.
• 13:21
  SPEAKER_00: It's so common, Brian.
• 13:22
  SPEAKER_00: I know you know this.
• 13:23
  SPEAKER_00: Like, how many times does this happen every week?
• 13:26
  SPEAKER_00: We have these conversations with clients.
• 13:27
  SPEAKER_00: We even invented a product around our bridge loan product.
• 13:31
  SPEAKER_00: Like, it's so common and it's not intentional.
• 13:35
  SPEAKER_00: No, no one's intending to screw the market.
• 13:37
  SPEAKER_01: No.
• 13:38
  SPEAKER_00: It's just a function of not being able to break that series of events, that line of events that has brought us to this point.
• 13:43
  SPEAKER_00: And if you're a home buyer and you want some affordability relief, you want some payment relief, an optional prepayment penalty is the way to go.
• 13:51
  SPEAKER_00: And listen, worst case scenario is man, you get a crazy promotion and you do have to wind up, you know, paying the prepayment penalty.
• 13:59
  SPEAKER_00: All right, it's six months' interest.
• 14:00
  SPEAKER_00: Yeah.
• 14:01
  SPEAKER_00: Right.
• 14:01
  SPEAKER_00: Okay.
• 14:02
  SPEAKER_00: That it's not great, but it's not the end of the world.
• 14:04
  SPEAKER_00: It's not like you're going to go down with the ship here.
• 14:07
  SPEAKER_00: Um it's but it but it's a way I think that almost all homeowners could improve their affordability picture substantively.
• 14:15
  SPEAKER_00: And it doesn't require the Federal Reserve and it doesn't require anything magical to happen with housing.
• 14:20
  SPEAKER_00: We don't need a 50-year amortization or something nutty that's going to create another decade worth of problems.
• 14:25
  SPEAKER_00: We can just allow investors to understand who's going to prepay early and who's not.
• 14:31
  SPEAKER_01: Yeah.
• 14:31
  unknown: Yeah.
• 14:31
  SPEAKER_01: And I think to your point, like we don't necessarily need legislation to fix this, right?
• 14:35
  SPEAKER_01: We just need a group of investors to come together who want to do that product.
• 14:38
  SPEAKER_01: Yeah.
• 14:38
  SPEAKER_00: Uh I look at You really just need Fanny or the FHFA to amend their guidelines.
• 14:43
  SPEAKER_01: And they literally could do that at the stroke of a pin.
• 14:45
  SPEAKER_00: Absolutely.
• 14:45
  SPEAKER_01: Right.
• 14:46
  SPEAKER_01: So I look back on like the very first couple of loans I did when I got in the business were all refinances.
• 14:52
  SPEAKER_01: Every single one of them I did, the borrower had a prepayment penalty on their old note.
• 14:57
  SPEAKER_00: Yeah.
• 14:58
  SPEAKER_01: And in almost every conversation I had, you know what they said to me?
• 15:02
  SPEAKER_01: I didn't know that was there.
• 15:05
  SPEAKER_01: Right.
• 15:05
  SPEAKER_01: And that's why eventually we got the Dodd-Frank Act that got rid of that.
• 15:10
  SPEAKER_01: To your point, I think what makes this easy to do is you're just talking about, hey, let's educate consumers on, hey, this is the price I can give you without the prepayment penalty.
• 15:19
  SPEAKER_01: Right.
• 15:19
  SPEAKER_01: And this is the price it can give you with it.
• 15:21
  SPEAKER_01: And your options are X months, X years, whatever.
• 15:25
  SPEAKER_01: And then they choose.
• 15:26
  SPEAKER_01: There's complete transparency to it.
• 15:27
  SPEAKER_01: And then you have an understanding as to what they're getting into.
• 15:31
  SPEAKER_00: 100%.
• 15:32
  SPEAKER_00: I I think you know, I'm gonna I boy, this is gonna be my podcast to say things that are probably gonna make it.
• 15:38
  SPEAKER_00: I love it.
• 15:38
  SPEAKER_00: Let's go.
• 15:39
  SPEAKER_00: Uh the uh I I think there's this thing we have in this country in this industry of just let's placate the consumer, let's shield them from the ugliness, let's not show them how the sausage is made.
• 15:52
  SPEAKER_00: Yeah, you know, for whatever reason, either we're afraid of what they're gonna do or they're gonna go to a competitor that's not gonna tell them these things.
• 15:58
  SPEAKER_00: I I don't exactly know what it is in us that that you know, this is back to the the customers always write philosophy.
• 16:05
  SPEAKER_00: Yeah, no, they're not.
• 16:06
  SPEAKER_00: And and no, we shouldn't shield them from this.
• 16:09
  SPEAKER_00: And what we should do, what we really owe them and ourselves are practical solutions to help them with the problem they're trying to solve.
• 16:16
  SPEAKER_01: Yeah.
• 16:17
  SPEAKER_00: And it's I I'm a much bigger, bigger believer in that than I am in telling someone, well, you'll never have a prepayment print penalty with us, and that's a good thing for you.
• 16:25
  SPEAKER_00: Not necessarily it's a good thing for you.
• 16:27
  SPEAKER_00: You told me you wanted to be in this house 10 years.
• 16:29
  SPEAKER_01: Yeah.
• 16:30
  SPEAKER_00: Plus.
• 16:30
  SPEAKER_00: So it would be a way better thing for you, given the trajectory of what's happening with inflation and interest rates and national debt, it'd probably be a way better thing for you to opt in to a five-year prepay.
• 16:40
  SPEAKER_00: Voluntarily, I'm not forcing this on you.
• 16:43
  SPEAKER_00: Voluntarily, let me show you the difference.
• 16:45
  SPEAKER_00: Let me show you the difference between no prepayment penalty and a three-year or four-year prepayment penalty.
• 16:50
  SPEAKER_00: You choose, right?
• 16:52
  SPEAKER_00: At least you're making an educated decision.
• 16:54
  SPEAKER_00: But when we shield the consumer from stuff like that, we do them no favors and we don't do ourselves any favors either.
• 16:58
  SPEAKER_00: Yes.
• 16:59
  SPEAKER_01: Well, I think at the time there was a lot of bad actors in our business.
• 17:02
  SPEAKER_01: Yeah.
• 17:02
  SPEAKER_01: And I'm sure there's still some bad actors out there, but we're also one of the most regulated industries in the world.
• 17:08
  SPEAKER_00: Oh, yeah.
• 17:08
  SPEAKER_01: Uh, I I think it's easy to police this.
• 17:11
  SPEAKER_01: For sure.
• 17:11
  SPEAKER_00: I I I think not that we need another disclosure, but I feel confident we could disclosure our way through this.
• 17:17
  SPEAKER_01: Let's just add one more to a stack of 130 pages, right?
• 17:20
  SPEAKER_00: Yeah.
• 17:21
  SPEAKER_01: So uh, Mark, give me give me one as we kind of close this out and we'll get into the next episode on what maybe one of your other points are.
• 17:28
  SPEAKER_01: Give us a little bit of a teaser.
• 17:30
  SPEAKER_00: Yeah.
• 17:30
  SPEAKER_01: Or were there any last thoughts that you wanted to give on the prepayment penalty idea?
• 17:34
  SPEAKER_00: Uh, I I just think when we look at this as housing professionals, these are not ideas that are gonna come to legislators.
• 17:43
  SPEAKER_00: It's not like a legislator is gonna sit around and go, hey, you know what would be a great idea for my constituency is for me to introduce something that's got a negative connotation to it.
• 17:51
  SPEAKER_01: Yeah.
• 17:51
  SPEAKER_00: No one's gonna do that in any sort of election cycle, whether it's a two-year, four-year, or six-year.
• 17:56
  SPEAKER_01: Yeah.
• 17:56
  SPEAKER_00: No one's gonna do that.
• 17:57
  SPEAKER_00: These ideas are gonna come from inside the machinery of housing.
• 18:01
  SPEAKER_00: And it's not fair to think real estate agents are gonna think about it either.
• 18:04
  SPEAKER_00: This isn't their purview.
• 18:06
  SPEAKER_00: It is gonna have to come from boots on the ground, mortgage industry professionals, through the MBA or otherwise.
• 18:12
  SPEAKER_00: And and I that's why I think that we're uniquely positioned, especially me and you.
• 18:16
  SPEAKER_00: We're out there doing it every day.
• 18:18
  SPEAKER_00: Every day.
• 18:18
  SPEAKER_00: I have these conversations with clients all the time.
• 18:21
  SPEAKER_00: It is, oh, you oh, you have$600,000 in equity.
• 18:25
  SPEAKER_00: Tell me what you're gonna do after you buy this new home.
• 18:27
  SPEAKER_00: Well, I'm gonna sell my existing home.
• 18:28
  SPEAKER_00: And then what are you gonna do?
• 18:29
  SPEAKER_00: Pay I'm gonna take all this money and I'm gonna plug it.
• 18:32
  SPEAKER_00: Oh, and then we're gonna have a nice round of EPOs.
• 18:34
  SPEAKER_00: And me as an owner in our company, I'm sitting there looking at that clawback and that loss that we're gonna have with those investors and thinking to myself, oh man, now I'm gonna have this conversation again.
• 18:42
  SPEAKER_01: Yeah.
• 18:42
  SPEAKER_00: You know, about what this actually does to the machinery of housing.
• 18:46
  SPEAKER_00: You've got to be better about educating our clients.
• 18:48
  SPEAKER_01: Trust me, I know that's sting.
• 18:49
  SPEAKER_01: Uh, EPO day was Friday.
• 18:51
  SPEAKER_01: I I had to make a bunch of calls on Friday.
• 18:53
  SPEAKER_01: That's like my least favorite day on the month.
• 18:56
  SPEAKER_00: And how often did we talk about EPO pre-pandemic?
• 18:58
  SPEAKER_00: Almost never.
• 18:59
  SPEAKER_01: Almost never.
• 19:00
  SPEAKER_00: We've never had these conversations.
• 19:01
  SPEAKER_01: Yeah.
• 19:02
  SPEAKER_01: Almost, almost never.
• 19:03
  SPEAKER_01: But yeah, I think part of it is yes, there is a ton of appreciation, you know, in homes today in the market, and people are wanting to do move move up.
• 19:11
  SPEAKER_01: Or I think even in some cases, like, you know, we're looking at when we bought the house, the house we live in now, we had no kids.
• 19:16
  SPEAKER_01: Then we went two kids.
• 19:18
  SPEAKER_01: Now one's in college, one's not that far behind.
• 19:21
  SPEAKER_01: So, like the house that we thought we were gonna live in for only a couple of years, we've ended up in for almost 20.
• 19:26
  SPEAKER_01: Now we have this ton of appreciation.
• 19:28
  SPEAKER_01: Yeah.
• 19:28
  SPEAKER_01: But to that point, we wouldn't buy another home without selling this one.
• 19:33
  SPEAKER_01: And that's kind of where that bridge line you talked about earlier would come into play too.
• 19:37
  SPEAKER_01: But also sometimes that leads to an early payoff, right?
• 19:40
  SPEAKER_01: Yeah, for sure.
• 19:41
  SPEAKER_00: So hey, you know, these ideas aren't all gonna be sexy.
• 19:44
  SPEAKER_00: Yeah, they're not all good.
• 19:45
  SPEAKER_01: Well, they're all they all are good.
• 19:47
  SPEAKER_01: They just sometimes they have unintended consequences, right?
• 19:50
  SPEAKER_01: But I think to your point, like Mark, what you're sitting here doing is you're actually trying to advocate on behalf of the consumer, right?
• 19:56
  SPEAKER_01: Now we have a fiduciary responsibility in the roles that we play at the company we're at, right?
• 20:00
  SPEAKER_01: And and that's to help our employees too, and to grow the company and be profitable and all of that stuff.
• 20:06
  SPEAKER_01: But this started with advocacy for the consumer.
• 20:08
  SPEAKER_00: Yeah.
• 20:09
  SPEAKER_01: And I think that's what matters.
• 20:11
  SPEAKER_01: We we will work through it on the corporate side, on the lender side, on how to deal with it.
• 20:16
  SPEAKER_01: It, you know.
• 20:17
  SPEAKER_00: But so, you know, bigger topic and getting into whatever episode this is gonna land in.
• 20:23
  SPEAKER_00: The problem we're all trying to solve, and this is a this is universal for people outside of mortgage, inside of mortgage, everybody who is interested in housing in the United States, which is should be about 340 million of us.
• 20:35
  SPEAKER_00: How do we fix this affordability problem?
• 20:38
  SPEAKER_00: Right?
• 20:38
  SPEAKER_00: Because this affordability problem now has been with us for four years.
• 20:42
  SPEAKER_00: And if you look out on the horizon and you take a peek into 2027, 2028, look out there and you tell me what's solving this.
• 20:50
  SPEAKER_00: What's going to solve this affordability crisis next year?
• 20:53
  SPEAKER_00: Are rates going back to four percent?
• 20:55
  SPEAKER_00: No.
• 20:55
  SPEAKER_00: Nope.
• 20:56
  SPEAKER_00: Would it be good if they did?
• 20:57
  SPEAKER_00: Probably not.
• 20:58
  SPEAKER_00: This half half of what got us here in the first place was ultra low borrowing costs that drove up the price of housing.
• 21:04
  SPEAKER_00: You borrow more, it felt like you were earning more.
• 21:06
  SPEAKER_00: You weren't really earning more.
• 21:07
  SPEAKER_00: Yeah, you could just afford more.
• 21:08
  SPEAKER_01: More buyers in the market, right?
• 21:09
  SPEAKER_01: Home appreciation goes up.
• 21:11
  SPEAKER_01: There you go.
• 21:11
  SPEAKER_00: We don't have enough inventory, and there you go with home prices.
• 21:14
  SPEAKER_00: So when you look out on the horizon and you say, what's going to solve this problem?
• 21:18
  SPEAKER_00: This that's for me in this business, this is my worthwhile task for us to look at the tools that we have and go, how do we fix this?
• 21:26
  SPEAKER_00: You know, I can't control what happens with, I can't even control what happens with a 30-year fix.
• 21:30
  SPEAKER_00: None of us can.
• 21:31
  SPEAKER_00: And that's something a lot of our clients don't know.
• 21:33
  SPEAKER_00: A lot of clients think we go back into our room and we dial it in like an oven temperature.
• 21:37
  SPEAKER_00: We use our advocacy.
• 21:38
  SPEAKER_00: Yeah, yeah.
• 21:38
  SPEAKER_00: Here it is.
• 21:38
  SPEAKER_00: I think we'll put out this rate today.
• 21:40
  SPEAKER_00: You know, we don't do that.
• 21:41
  SPEAKER_00: The market dictates that.
• 21:43
  SPEAKER_00: We can't control wages, right?
• 21:44
  SPEAKER_00: I can't control wages.
• 21:45
  SPEAKER_00: And even if I could, driving wages up above trend is gonna create an inflation problem.
• 21:50
  SPEAKER_00: Can't control home prices.
• 21:52
  SPEAKER_00: So what can we control?
• 21:53
  SPEAKER_00: Right?
• 21:54
  SPEAKER_00: What can we, what levers can we pull that will make a meaningful difference without creating a terrible consequence?
• 22:00
  SPEAKER_00: This is just one.